India's manufacturing sector likely to decline in Q3 due to slugging exports: FICCI

The industry chamber in a survey had earlier indicated a revival in the manufacturing activity in the second quarter of the ongoing fiscal, which seems to be slowing down little bit in the October-December period, as a lesser percentage of respondents expect high growth to continue in the quarter under review.PTI | Updated: December 27, 2015, 16:58 IST

NEW DELHI: The revival prospects for India's manufacturing sector in the October-December quarter seem to be weakening mainly due to a sluggish exports scenario, according to Ficci.

The industry chamber in a survey had earlier indicated a revival in the manufacturing activity in the second quarter of the ongoing fiscal, which seems to be slowing down little bit in the October-December period, as a lesser percentage of respondents expect high growth to continue in the quarter under review.

"The percentage of respondents expecting higher growth in the December quarter has gone down to 55 per cent as compared to 63 per cent for the previous three months," Ficci said.

"Exports are primarily responsible for this less optimistic outlook besides domestic factors like poor demand conditions, high interest costs etc," it added.

Responses have been drawn from 336 manufacturing units from both large and SME segments with a combined annual turnover of over Rs 3.94 lakh crore.

In terms of order books, 44 per cent respondents reported higher order books for the October-December quarter which is almost the same as that of the previous three-month period, indicating a muted demand conditions, the survey noted.

The export outlook for manufacturing followed its trajectory downwards in the third quarter, as the proportion of respondents expecting higher exports in the quarter is 24 per cent as compared to 36 per cent in the September quarter and 33 per cent in April-June of the current fiscal.

"Though, the proportion of respondents expecting lower exports has also gone down from 43 per cent in the second quarter of 2015-16 to 37 per cent in the December quarter, the scenario remains bleak as percentage of respondents expecting no change in their export level has also increased," Ficci stated.

In terms of investment, 68 per cent respondents in the third quarter said that they do not have any plans for capacity additions for the next six months as compared to 73-75 per cent in the previous quarters, implying slack in the private sector investments in manufacturing to continue.

Poor demand conditions, high cost of borrowing, delayed clearances and cost escalation are some of the major constraints which are still affecting the expansion plans of the respondents.

Based on expectations in different sectors, the survey pointed out that ten out of twelve sectors were likely to witness low to moderate growth (less than 10 per cent).

Two sectors namely, capital goods and auto are likely to witness strong growth of over 10 per cent in the third quarter, it said.